Vantage Point - Clinical progress required to reignite RNAi field

The star over the RNA interference (RNAi) field may have waned dramatically over the last 12 months but this week has seen a flickering of life with fresh injections of cash into some of the main protagonists.

Silence Therapeutics, Benitec and Marina Biotech have raised relatively decent but still modest sums - $8m on average - with the aim of taking their respective products to the next stage and provide the kind of data that might rebuild some confidence in a technology dented by the recent exodus of big pharma. The RNAi field is in retrenchment mode, a phase that affects most novel technologies at some stage, and it is now up to these companies to deliver. “The onus is on us to prove that this works”, says Peter French, chief executive of Benitec, the Australian biotech aiming to use its $8.4m to take two candidates into the clinic within the next 18 months.

Fall from grace

Just a few years ago expectations for the technology were sky high, with research in the field winning all sorts of awards and prizes, culminating in Merck & Co’s whopping $1.1bn acquisition of Sirna Therapeutics in 2006.

For decades RNA was seen just as a messenger for DNA, simply passing on the coding to convert genetic information into proteins. However, in 1998 two leading researchers, Andrew Fire and Craig Mello, published a paper demonstrating that RNA plays a vital role in turning genes on or off, research that earned them a Nobel Prize in 2006.

The RNAi pathway is present in every cell of nearly all multi-cellular organisms, possibly evolving as a natural defence mechanism against double-stranded RNA viruses. By interfering with messenger RNA, genes can be ‘silenced’, suggesting huge and broad therapeutic potential for RNAi based agents which can destroy rogue genes or viral genomes.

However, clinical advances seeking to exploit this potential have been disappointingly few and far between, with one of the main challenges being the effective delivery of RNAi-based therapeutics to a target organ.

Little has come from Sirna’s portfolio and technology platform so far and last year four other big pharma companies – Roche, Novartis, Pfizer and Abbott Laboratories – scrapped external research collaborations and internal research efforts on the technology.

Alnylam, along with Sirna the dominant player in the space, bore the brunt of these disappointments, particularly Roche’s decision late last year to exit the field as part of its R&D restructuring programme. The Swiss group had previously invested heavily in the technology and collaborated with Alnylam since 2007. This came a year after Novartis' called a halt to a deal, which had forced the Massachusetts biotech into a cost-cutting initiative resulting in a 30% reduction to its workforce.

The table below shows some of the leading public companies working within the broad field of RNAi. Most share prices have taken a hammering in the last 12 months, losing two-thirds on average, and now trade close to record lows and not much above current cash levels.

Gene silencing companies - latest cash and valuations
Market Capitalisation ($m) Latest reported cash ($m) Cash date Latest financing ($m) Financing date 12-month share price performance Share price
Alnylam Pharmaceuticals 421 343 31-Mar-11 - - -39% $9.95
RXi Pharmaceuticals 38 11.1 31-Mar-11 10.9 Apr-11 -78% $0.92
Tekmira Pharmaceuticals 29 9.2 31-Mar-11 - - -61% $2.76
Benitec 14 0.4 31-Mar-11 8.4 May-11 -34% A$0.03
Marina Biotech 13 2.3 31-Mar-11 6.9 May-11 -95% $0.24
Silence Therapeutics 9 5.8 31-Dec-10 9.4 May-11 -76% £0.02

Contrast these declines against the gains for biotech stocks in general – the Nasdaq Biotechnology Index is up 30% over the last 12 months – and the extent to which public market confidence in the technology has soured is clear.

Max Herrmann, Silence’s chief financial officer, agrees that sentiment towards the sector has taken a hit, particularly hurt by Roche’s decision. “It got very negative when Roche pulled out”, he says. He believes big pharma rushed in to the technology in 2005 and 2006 expecting it to be relatively easy, without appreciating it would not necessarily fit with their ideology of known targets and ease of delivery.

However, pointing to a shift in the past 12 months from a focus on platform technologies to the products themselves, Mr Herrmann is encouraged by recent pipeline progress. “There is now much more focus on what’s coming out of the pipelines of these companies than there was 12 months ago," he says.

Generating viable products is the key to regaining investor and big pharma confidence. For example, analysts now see Alnylam’s value being driven by pipeline development rather than any expectation that it will strike further platform deals. The company recently launched the ‘Alnylam 5x15’ initiative, the plan being to progress five RNAi therapeutic programs into advanced clinical development by 2015.

Prove it

In terms of what will improve the fortunes of RNAi, there is clear consensus: successful clinical progress.

“It’s got to be drugs, unfortunately that’s going to take time,” says Mr Herrmann. “What will transform the field is progress in the clinic, particularly phase III programs; what will definitely change it is commercial success, an RNAi program being launched into the market”.

Peter Francis, Benitec’s chairman, concurs: “I am strongly of the view that the onus is on us to be able to demonstrate the efficacy of the technology at least to a phase I/II trial; that will draw the attention back to the technology”.

Samir Devani, analyst at NomuraCode, sees a tough environment for these RNAi companies at the moment and agrees that ultimately it will take clinical progress to attract excitement again. “Hopefully at some point the data generated will be good enough for somebody to take a bite”.

A good place to start the road to recovery could be this year’s Asco cancer conference. Whereas last year there was little data to show off the potential of RNAi, this time around there will be phase I results in solid tumours from Silence’s Atu027 and Alnylam’s ALN-VSP. However, despite announcing encouraging data for lead candidates from their internal pipelines, neither company’s share price has received a boost.

As to reaching all important phase III, privately-held Quark Pharmaceuticals’ PF-04523655, a RTP801 RNAi therapeutic for diabetic macular oedema (DME) in development with Pfizer and Silence, could have entered pivotal trials this year were it not for recent approvals for Lucentis in DME.

The product’s phase II study, DEGAS, started in 2008 when the standard of care was laser therapy. Lucentis’ progress in DME means PF-04523655 needs to prove itself in an ongoing phase IIb head-to-head, before phase III studies are warrented. Which means pivotal studies will not start until 2013 at the earliest.

Benitec hoping to ‘express’ its value

Enabling an RNAi effect in cells can come from either an ‘expressed’ or a ‘delivered’ route, depending on whether the RNAi molecules are expressed within cells or delivered externally. The ‘delivered’ route has been the one most commonly adopted in the field so far, encapsulating the RNAi molecule in a lipid or polymer structure, but the inherent challenges of this approach have been tough to overcome.

These packages of RNA can be broken down in the bloodstream and even if they reach the target organ have trouble entering the cells, although progress has certainly been made on developing much more effective delivery technologies – recent breakthroughs mean this drawback is becoming less of a hurdle than it was.

Benitec has adopted the ‘expressed’ route, whereby a viral vector can more effectively deliver a DNA construct into target cells, triggering the production of double stranded RNA, cleaved into small interfering RNA (siRNA), which can then enter the cellular RNAi pathway to have its gene silencing effect. As such the RNAi effect, called DNA-directed RNAi (ddRNAi), is ‘expressed’ within the cells and Benitec actually likens the approach more to gene therapy.

This distinction could be important given that the regulatory path for gene therapy has been more widely trodden, albeit with limited success so far. The upcoming European decision on Amsterdam Molecular Therapeutics’ gene therapy, Glybera, could therefore have wider implications (Event - AMT hoping to make history with gene therapy approval, May 10, 2011).

Regaining interest – partnerships, consolidation

Benitec’s fresh injection of cash, made possible by recent favourable patent rulings in the US and Europe for the company’s ddRNAi technology, will fund the start of clinical trials for two candidates – one for alleviating cancer-associated pain in terminally ill patients and another targeting drug-resistant lung cancer.

Depending on the outcome of these trials, development partners may be sought, but the timing and strength of the data is crucial. “We don’t want to go too early. It’s a criticism often levelled at Australian biotechs”, says Mr Francis. “The ability of going pre-data, in our space in particular, is not so possible. The generation of meaningful data is a much better way of negotiating a collaboration or licensing deal”.

Despite big pharma appearing to be turning its back on the RNAi field, Mr Francis is confident there are still champions of the technology within these organisations that could be won over, but only if the clinical data is compelling enough.

Mr French claims that some analysts are saying that negativity towards RNAi is bottoming out. This may be true given the extent of share price declines and stocks trading close to cash levels, although so far there is little sign of recovery.

What might get things moving and make investors take notice once more is some consolidation between these companies which are struggling to stay afloat and have conflicting intellectual property claims, although many of the biggest issues have been resolved.

“There is a strong case for consolidation,” says Mr Devani, who believes that pooling cash, technology and IP would make for “a much more investable proposition”.

Yet consolidation within biotech peer groups rarely happens – a recent unnamed offer process for Silence Therapeutics failed to result in a deal – suggesting that the focus for these players will have to remain on developing meaningful clinical data, to draw some much needed attention back to the RNAi field.

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